What Kind of Insurance Is Required for Rental Property?
Rental property can be covered by several types of insurance. State laws specify what type of insurance is required, and the landlord picks additional areas of coverage. The insurance may be purchased by the landlord or the renter, and covers several types of damage including natural disasters, personal injury and theft.
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Landlord Selected
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Many landlords choose their own source of rental insurance coverage. The renters then simply pay the monthly premiums as part of the rent. This is simple to manage in a large building or complex with similar rental spaces, as a standard policy will cover each unit. The landlord may also get a volume discount this way.
Renter Selected
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Some landlords direct the renter to purchase renter's insurance. The landlord may simply tell the renter to go and get insurance, or may list additional policies that must be included in the coverage. The renter shows proof of the purchase, such as a photocopy of the forms, to the landlord. In this situation the renter is responsible for the policy, including premium increases or changes in coverage. The renter may also decide to transfer the policy to a different insurance company.
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Natural Disaster Coverage
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Natural disasters are commonly covered. The type of disaster covered can vary by state; California policies may include earthquakes and fire, Florida policies may include hurricanes. State laws may require insurance coverage in all buildings for common types of disasters. Government policies cover disasters considered too risky to be included in normal renter's insurance, such as the National Flood Insurance Policy.
Personal Injury Coverage
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Personal injury coverage is also necessary. If the renter invites people onto the property, and one of the guests trips and falls, the injured party may sue the landlord. The renter may also be injured while present at the rental property. To protect against this risk the landlord requires a policy that can pay for an injured person's medical bills.
Theft and Loss
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Theft and loss are also often covered. The landlord is concerned about items left behind in the unit, and thieves in an unfurnished unit can still strip pipes, remove sinks and take other fixtures. Renters will want to have theft protection for their personal property, in case someone walks in and grabs their TV, their computer, and other valuables. The insurance company will ask for records of the insured items, such as purchase receipts, when setting this policy. According to Allstate you can also decide to insure replacement of the item alone, or get extended coverage for valuable items such as jewelry.
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References
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